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CALIFORNIA CORPORATE & SECURITIES LAW

Who Votes As Proxy For Shares Standing In The Name Of Another Corporation?

The Proxy Season blog yesterday discussed the following question from the Q&A Forum of TheCorporateCounsel.net: Under Delaware law, can a Board of Directors authorize a person who is not an officer of the company to act as agent and vote shares of stock for the Company that it holds in another entity? John Jenkins responded…

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This Company Solicited Consents To Remove A Sitting Director

It’s not often that you see a company soliciting consents to remove one of its sitting directors.  However, that is what PICO Holdings, Inc. sought to do in this consent solicitation statement filed with the SEC on October 31, 2016.  According to PICO’s Form 8-K , John R. Hart’s employment as president and chief executive officer of the company “was terminated”…

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When A Director May Not Be Interested In Director Compensation

Suppose that a corporation has three directors, A, B & C, each of whom is compensated by the corporation.  Is director A financially interested in a resolution fixing the compensation of director B?  Corporations Section 310(a) provides the following answer: A director is not interested within the meaning of this subdivision in a resolution fixing the…

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Court Addresses “Fair Value” Determination In Statutory Buyout Proceeding

When when a shareholder sues for involuntary dissolution, the corporation, or the holders of 50% or more of the voting power of the corporation, may avoid the dissolution by purchasing for cash the plaintiff’s shares at their “fair value.”  Cal. Corp. Code § 2000.  The statute establishes several parameters for determining “fair value”.  Thus, “fair value” must…

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When Non-Voting Shares Have The Right To Vote

The California General Corporation Law authorizes a corporation to “issue one or more classes or series of shares or both, with full, limited or no voting rights”.  Cal. Corp. Code § 400(a).  Thus, it may be reasonable to assume that when a corporation issues shares with no voting rights, those shares would have no right to…

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Incorporating In Delaware May Not Eliminate Director Liability Under This California Statute

Some readers may have skipped this week’s posts discussing director liability under California Corporations Code Section 316 on the theory that the statute applies only to directors of corporations incorporated under the General Corporation Law.  That could be a big mistake.  California’s pseudo foreign corporation statute, Corporations Code Section 2115, applies Section 316 to foreign…

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Does The Foolish Director Abide Whilst The Wise Director Flees?

Never fear? Smith Is No Longer Here Yesterday’s post highlighted Section 316 of the California Corporations Code, a statute that imposes joint and several liability on directors who approve specified transactions such as a loan to an officer contrary to Section 315.  Now consider the following scenario: Dr. Zachary Smith, a director, attends a meeting of the…

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In California, Directors Who Abstain May Still Face Liability

Section 316(a) of the California Corporations Code imposes joint and several liability on directors who approve any of the following actions: The making of any distribution to shareholders to the extent contrary Sections 500 – 503; The distribution of assets to shareholders after institution of dissolution proceedings of the corporation, without paying or adequately providing…

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Hairsplitting The Polls

In recognition of today’s election, today’s post is about polls, poles and Poles. The General Corporation Law uses the word “poll” exactly once – in describing the duties of the inspectors of election at meetings of shareholders. Section 707(b) of the Corporations Code provides that the inspector(s) must determine, among other things, “when the polls shall close”.  Oddly, the…

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When CEOs Read This, They May Become Less Enamored Of Delaware

In a forthcoming paper, Professors Murali Jagannathan (Binghamton University School of Management) and A.C. Pritchard (University of Michigan Law School) evaluate whether there might be  relationship between incorporation in Delaware and Chief Executive Officer turnover.  The two professors conclude that Delaware firms terminate their CEOs significantly more frequently than the average firm in their study.  They found that decisions by Delaware boards to force out…

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